Drones are starting to shed their reputations as James Bond-like tools for spies and intelligence specialists and are now making their way headlong into the mainstream commercial market. These days, it’s just as likely that a drone will deliver your pizza as track down a double agent on an undercover assignment in Prague — and that’s good news for customers and investors.
Consider these data points from the latest StartUs Insights Drone Industry Report, which tracked 2,000-plus drone startups and the wider industry to get a grip on where the sector stands right now:
— The worldwide drone industry grew by 4.7% over the year ended in July, with more than 33,000 drone companies up and running.
— The sector has about 2.1 million workers, adding about 127,000 employees in the past year.
— More than 29,000 drone patents and 6,000 grants are in play right now, suggesting an expanded presence on the research and development front.
— Drone startup funding is on the rise, with average investor funding clocking in at $27.2 million per funding round.
— Big players like Goldman Sachs Group Inc. (GS), the U.S. Department of Defense and Baidu Inc. (BIDU) have invested over a combined $1 billion into developing new drone technologies.
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With the drone industry in robust growth mode in the second half of 2024, which stocks stand out? Here are seven for your “must track” list:
| Drone Stock | Implied upside* |
| Amazon.com Inc. (ticker: AMZN) | 23.8% |
| EHang Holdings Ltd. (EH) | 77.7% |
| Kratos Defense & Security Solutions Inc. (KTOS) | 6.0% |
| AeroVironment Inc. (AVAV) | 26.3% |
| Boeing Co. (BA) | 44.9% |
| Joby Aviation Inc. (JOBY) | 93.1% |
| Northrop Grumman Corp. (NOC) | 14.7% |
*Based on analysts’ 12-month price target and the share price as of the Sept. 19 market close.
Amazon.com Inc. (AMZN)
Amazon is ramping up its drone efforts, introducing quieter delivery drones in ongoing select testing in College Station, Texas. It’s also lobbying the U.S. Federal Aviation Administration for drone flight expansion from 200 flights per day to 469 flights and for nighttime flight hours. Amazon wants to widen its drone operating flight range from 44 square miles to 174 square miles as well.
Simultaneously, Amazon is undergoing a company-wide cost-cutting campaign that could decelerate its drone development programs. The company recently shut down its California drone delivery site, but it is planning to open a new drone delivery testing site in Tolleson, Arizona, as well as in the U.K. and Italy. Amazon being Amazon, nobody is genuinely worried about its commitment to aerial transport deliveries, as it looks to provide quicker, quieter and more frequent drone delivery services heading into 2025.
Amazon stock hasn’t been blowing anyone away of late, but signs of a breakout are peeking through the clouds. DBS analyst Nashrullah Putra Sulaeman, for example, has maintained a “buy” rating on AMZN with a $235 price target. AMZN closed at $189.87 per share on Sept. 19.
EHang Holdings Ltd. (EH)
EHang shares are down significantly in 2024, with the stock sliding 15% over the past three months and down about 26% year to date as of Sept. 19.
The China-based aerial vehicle technology platform company looks like it’s set for a rebound after sales of its EH216-S products rose in the second quarter of 2024, with 49 flight units sold. That’s the highest quarterly sales figure in the company’s history (in Q2 2023, for example, EHang only sold five units). Predictably, the rise in flight unit sales translated into a big revenue boost in Q2.
Wall Street analysts are taking note. In late August, UBS initiated coverage on EH with a “buy” call and a $22 price target (it closed at $12.38 per share on Sept. 19). The financial services company is reportedly telling clients that EH is two to three years ahead of its competitors and may have a 50% market share in the burgeoning eVTOL market by 2030.
Kratos Defense & Security Solutions Inc. (KTOS)
Kratos is experiencing a share-price renaissance. Its stock price has increased about 13% over the past 90 days and 56% over the past year. Plus, the company is making news on a variety of fronts. In mid-September, Kratos reported that its Technical Directions subsidiary now provides four classes of its high-end turbojet engines, with a thrust force ranging from 30 to 200 pounds. That should attract attention in the cruise missile and munitions systems industries, which could further pad Kratos’ financial nest.
Kratos is also a missile manufacturer. As countries fortify their defense efforts and sabers rattle in Ukraine, Iran and Taiwan, Kratos stands to generate big gains: The worldwide missile sector should see revenues rise by a compound annual growth rate of 7.4% through 2030.
Recent contracts with the U.S. Navy (for $22.9 million) and the U.S. Space Force’s Space Systems Command (up to $579 million) show that Kratos already has robust government connections. Additionally, the Israel-Hamas conflict in the Middle East and the Ukraine-Russia war have boosted military drone stocks, and Kratos is a big beneficiary.
Analysts have issued an average target price of $24.17, based on FactSet data, compared with KTOS’ closing price of $22.80 on Sept. 19.
AeroVironment Inc. (AVAV)
AVAV is in dip mode in the third quarter of 2024, with its stock price down about 18% in the past three months, but it’s still up 43% so far in 2024.
The Arlington, Virginia, drone and missile manufacturer has hit a rough patch in the form of a formal protest that’s holding up a massive five-year contract worth up to $990 million. The contract was lined up with the U.S. Army to purchase AeroVironment’s Switchblade drones, but a “stop” by the U.S. Government Accountability Office has left AVAV in the lurch, at least temporarily, until Uncle Sam and AeroVironment sort the mess out.
The stock fell almost 9% on the news, as analysts pegged short-term revenue losses due to the protest at $33 million for the second and third quarters. AVAV should survive the issue, as the vast majority of “protest” contract squabbles wind up favoring the original contract recipient.
This scenario could provide an opportunity for drone stock investors, though, who could buy this solid stock on the dip and perhaps profit when the contract issue is resolved.
Analysts have issued an average target price of $227, based on FactSet data, compared with AVAV’s closing price of $179.69 on Sept. 19.
[See: Artificial Intelligence Stocks: The 10 Best AI Companies.]
Boeing Co. (BA)
You can’t talk “buy the dip” without mentioning Boeing, which has had its share of buzzard’s luck in 2024, helping to push its stock price down a surprising 41% year to date.
The bad news started right out of the gate. In January, Arlington-based Boeing was facing increasing criticism over the safety of its 787 Dreamliner jets when an emergency door plug malfunctioned on an in-air Boeing 737 Max 9 jet flown by Alaska Airlines. In late May, Fitch Ratings lowered its 2024 financial outlook on BA following the company’s safety woes and declining production.
September brought a potentially crippling machinist strike affecting 33,000 workers in Boeing plants in Oregon and Washington. Those workers turned down a 25% raise over four years, added employer matches to employee 401(k) plans, and a cut in employee health care insurance premiums. Boeing union representatives turned a cold shoulder to the offers because, they argued, the workers deserve more pay due to rising inflation. Boeing has reported that it has lost $25 billion since 2018 due to legal damages and company cost overruns, and it may also be facing a Moody’s downgrade due to the strike.
Yet Boeing holds a few valuable cards. The company has an enviable market presence, at least among its competitors, and it sits on its leadership perch at a time when global military conflicts have fueled rising demand for its aircraft and other aerospace products. Citi analyst Jason Gursky recently held his “buy” position on BA stock with a price target of $224. BA closed at $154.59 per share on Sept. 19.
Joby Aviation Inc. (JOBY)
Santa Cruz, California-based Joby, which specializes in building all-electric vertical-takeoff vehicles, is on the rebound in September. Its share price is up 4% over the past three months, which represents a comeback for a stock that’s down 22% on a year-to-date basis.
Joby made news in June with its purchase of the autonomous technology division Xwing, which develops in-house autonomous software called Superpilot that allows companies to make “safe and uncrewed” autonomous flights. The company has successfully managed 250 autonomous flights and 500 landings and touts itself as the world’s first “gate to gate” autonomous flight technology systems provider. That’s a good get for Joby, which also recently was cleared by the FAA to certify its eVTOL aircraft for air-worthiness. That decision clarifies the FAA’s stance on eVTOL aircraft standards, making them easier to build, and requires no redesign of Joby aircraft.
Joby also has $900 million in reserve cash, which allows it to build more eVTOL aircraft on a tighter schedule. It recently announced an exclusive deal with Dubai that gives Joby air taxi rights for six years starting in 2025.
Analysts are generally bullish on the stock. Morgan Stanley’s Kristine Liwag recently maintained a “buy” rating on JOBY with a price target of $10. JOBY shares closed at $5.18 on Sept. 19.
H.C. Wainwright’s Amit Dayal went the same route, issuing a “buy” on Joby shares with a $9 price target. Dayal cites Joby’s firm foothold on the emerging eVTOL aircraft industry and the likelihood that Joby will launch commercial flight operations by 2025.
Northrop Grumman Corp. (NOC)
Northrop Grumman is riding high in the second half of 2024, with its shares up 23% over the past 90 days as of Sept. 19. The company saw its first earnings decline in the past four quarters with revenues up a modest 6%, but few analysts see problems with NOC — not when military conflicts are rising around the world and governments are stacking cash to fortify their defense programs.
The U.S. Department of Defense alone has an $841 billion budget for fiscal year 2024, and roughly half of that amount is specifically designated for defense spending. Drones will make up a growing share of that pie, and Northrop has been making news on that front. In August, Northrop rolled out a low-cost guided-ammunition system called Cannon-Based Air Defense, which defends against a host of aerial threats, including drone swarms and cruise missiles.
Maybe that’s why Seaport Research is keeping its “buy” rating on NOC stock, and moving its price target from $530 to $599. The Falls Church, Virginia-based advanced aircraft systems developer also offers a solid 1.6% dividend yield, which provides an added income benefit to shareholders. NOC stock closed at $522.26 per share on Sept. 19.
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7 Drone Stocks to Buy in 2024 originally appeared on usnews.com
Update 09/20/24: This story was previously published at an earlier date and has been updated with new information.
